1. The Lender
A mortgage broker is not the one giving the clients the loan. They use a network of lenders to help broker a mortgage between the client and the lender. The network of a mortgage broker not only consists of major banks and financial institutions but also 'Class B' and 'Class C' lenders, explains Angela Milosevic of Mortgage Alliance. That being said, they will be knowledgeable of their lenders and will only recommend the best ones. When looking at a lender, you should find out if they are recommended by a mortgage broker and why, says Deb Murdoch of The Mortgage Group. The potential borrower should also do research to determine if the lender provides good service and is accessible.
2. The Product
Every mortgage is not the same and each will have different terms and conditions. It's important to read the fine print and determine what mortgage will fit with various situations. A mortgage broker is versed on reading a mortgage to determine what it offers - or doesn't. Interest rates don't vary much from lender to lender, but what does vary is the fine print, says Eva Neufeld of Mortgage Tailors. This is why it's so important to carefully read and understand the mortgage. You should evaluate for prepayment privileges, portability and payout penalty calculations, Deb says. Prepayment privileges allow the borrower to pay ahead of the payment schedule without incurring fees, while portability allows for the transfer of a mortgage from one house to another. If the borrower decides to refinance their home in the future, depending on their payout penalty calculations, they could end up paying a lot. By neglecting to learn about their terms, the borrower may find themselves spending money needlessly.
3. The Rate
Many clients often think this is the most important part of the mortgage, but they couldn't be more wrong. Priority should be given to [the lender and the product] and then the rate, Deb Murdoch explains. With all the different little things that go into making a mortgage as a whole, it should come as no surprise that special attention will need to be given to other points. Just because it may be the lowest interest rate for the term, doesn't mean it [has] the lowest overall cost, Eva Neufeld explains. The other factors explained above can end up costing the borrower a lot of money, when they could've just gotten an interest rate that was only 0.1% more, with better terms and conditions. However, the rate still is important. The rate does not have to be the best rate, but it should be in the top three, says Deb Murdoch. After all, the rate still has big say in determining the monthly payments.
Overall, the mortgage needs to be examined as a whole. Each point above goes into making a great mortgage that fits a borrower's needs. You're looking for a mortgage product to match your financial situation and requirements, Angela Milosevic explains. A borrower should be prepared to compromise and know which points they refuse to compromise on.